STATE OF NEW YORK
INSURANCE DEPARTMENT25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the
following opinion on July 26, 2006, representing the position of the New York State
Insurance Department.

Re: Public Adjuster Compensation

Question Presented:

Would an agreement that provides for the public
adjuster to receive a fee equal to fifty percent of the amount by which the settlement is
subsequently increased (but in no event to exceed 12.5 percent of the total settlement) be
permissible under N.Y. Comp. Codes R. & Regs. Tit. 11 Part 25 (2006) (Regulation 10)?

Conclusion:

The public adjuster may not charge any insured a fee
in excess of 12.5 percent of the recovery for services rendered by the adjuster. The 12.5
percent maximum must be calculated based upon monies paid to the insured after it has
retained the services of the public adjuster. Any monies paid by the insurer to the
insured prior to execution of the public adjuster compensation agreement may not be
considered in calculating the 12.5 percent maximum.

Facts:

The inquirer stated that his company wished to be
retained as a public adjuster by an insured who is already in the process of negotiating
settlement of a loss claim with an insurer. The insured had not previously engaged a
public adjuster in the matter. He proposed to utilize a compensation agreement that called
for him to receive a fee equal to fifty percent of the amount that the final settlement
exceeds the offer pending at the time the insured contracted with him to act as public
adjuster (but in no event to exceed 12.5 percent of the total settlement).

The entity identified on the letterhead of the
correspondence is not licensed by the New York State Insurance Department. As such it
would be illegal for that entity to act as a public adjuster. However, upon review of the
Departments records, we determined that the inquirer was the sublicense of a
licensed public adjuster that has the same address as the unlicensed entity. The licensed
entity is the subject of a complaint in the Departments Consumer Services Bureau.
The complaint was filed by an insurer objecting to the use of a compensation agreement
that appears to contain provisions similar to the provisions the inquirer proposed to use
in the compensation agreement for the unlicensed entity.

In both cases, the compensation agreement calls for
the public adjuster to receive a fee equal to fifty percent of the amount that the final
settlement exceeds the offer pending at the time the insured engaged the services of the
public adjuster, but in no event to exceed a stated maximum percentage of the "total
settlement".

Analysis:

N.Y. Comp. Codes R. & Regs. Tit. 11 § 25.7
(2006), regarding "maximum compensation" for public adjusters, states that
"No public adjuster shall charge any insured a fee in excess of 12.5 percent of the
recovery for services rendered by the adjuster."

N.Y. Comp. Codes R. & Regs. Tit. 11 § 25.13
(2006) sets out a sample "Public Adjusters Compensation Agreement" which
is "...hereby approved for use as specified in this Part:..." The form states
that the insured agrees to retain the public adjuster "...to act or aid in the
preparation, presentation, adjustment and negotiation of or effecting the settlement of
the claim for the loss or damage...and agrees to pay the adjuster for such services a fee
of _____ percent of the amount of the loss including salvage when adjusted or otherwise
recovered from the insurance companies."

The inquiry raises the issue of how to treat a
situation where the insured engages the services of public adjuster after negotiations
with the insurer are underway. The insurer may have made an offer or payment to the
insured prior to execution of the compensation agreement.

If the insurer has already made a payment to the
insured at the time the public adjuster is retained that portion of the settlement cannot
be characterized as resulting from the "services rendered by the adjuster". This
means any payment made by the insurer prior to execution of the public adjuster
compensation agreement cannot be considered in calculating the 12.5% maximum compensation.

However, where the insurer has made an offer to the
insured prior to the public adjuster being retained, but the insurer has not paid any
monies to the insured, the insurer would be free to withdraw its offer at any time. The
public adjuster could receive compensation equal to 12.5 percent of the total settlement,
if it results from services rendered by the public adjuster.

A public adjuster compensation agreement providing
for payment of a fee equal to fifty percent of the amount by which a pending settlement
offer is subsequently increased would not be violative of Regulation 10, so long as the
maximum compensation is limited to no more than 12.5% of the recovery for services
rendered by the adjuster.

For further information you may contact Supervising Attorney Sam
Wachtel at the New York City Office.